Which unit of comparison is commonly used for valuing office properties?

The unit of comparison commonly used for valuing office properties is the price per square foot of net rentable area. This metric is preferred in the context of office buildings because it provides a standardized way to analyze and compare properties based on their productive floor area.

Net rentable area refers specifically to the square footage available for rent, excluding areas that are not utilized for tenant occupancy, such as hallways, bathrooms, or any shared common areas. By focusing on this measure, appraisers can deliver a clearer picture of the value that can be derived from the space, as it directly correlates with the rental income that the property can generate.

Using price per square foot of net rentable area allows investors and appraisers to effectively compare similar office properties within a market, as it normalizes differences in building size and layout. Consequently, this unit of measure serves as a critical tool in helping stakeholders make informed decisions regarding property investments, financing, and development within the commercial real estate market.

Other units of comparison, such as price per room or price per square meter, may be relevant in different types of real estate, such as hospitality or residential, but do not align with the specific characteristics and valuation practices of office properties.